Investopedia: DuPont - From Gunpowder To Plastics To Yogurt

If a company is going to hang around for a couple of centuries, it is a good bet that it will have to change and adapt with the times. DuPont (NYSE:DD) is an excellent case in point - while grouped into the generally stodgy, boring, and cyclical "chemicals" industry group, DuPont has a rather remarkable record of remaking itself and getting involved in new growth markets. Though DuPont's record of diversification is not flawless, investors should at least be willing to give management the benefit of the doubt with this latest acquisition. 

3D - DuPont's Danisco Deal
DuPont announced Monday morning that it would acquire Danish ingredient and enzyme company Danisco for $5.8 billion in cash and the assumption of an additional $500 million of Danisco's debt. The deal gives a better than 25% premium to Danisco shareholders and will likely produce more than 10% earnings dilution for DuPont in the first year.

As has already been widely reported, this is an unusually large deal for DuPont - the largest deal the company has done since it acquired Pioneer for nearly $8 billion more than a decade ago. That deal, though, has proven to be an exceptionally good move in hindsight, as DuPont is now one of the leading advanced seed trait companies in the world. (For related reading, see 2010's Highest Performing DJIA Stocks.)

Some New, Some Old
About two-thirds of Danisco's revenue comes from products for the food industry - an industry that DuPont has heretofore not been much of a focus for the company. In addition to a sweeteners business that competes with the likes of Tate and Lyle (Nasdaq:TATYY), Danisco sells a host of so-called "enablers" that include emulsifiers, stabilizers, flavor enhancers, and so on. In more practical terms, when you buy a bottle of salad dressing and it stays shelf-stable for weeks, that is because of the kinds of products Danisco produces.

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A Royal Present For Martek Shareholders

Martek Biosciences (Nasdaq:MATK) shareholders woke up to an early Christmas present Tuesday morning, as the company agreed to sell itself to a Dutch chemical conglomerate. Although Martek is going at price that is about 50% of its all-time highs, shareholders can take some satisfaction that their board of directors managed to get a price for these shares that the market has not been willing to pay for about two and a half years. 

A Healthy DealDSM (also known as Royal DSM) (Nasdaq:RDMSY), a Dutch conglomerate that is increasingly focused on nutrition and pharmaceuticals, has reached an agreement to acquire Martek for $31.50 per share in cash. That represents a total deal price of $1.09 billion for DSM and a premium of about 35% for Martek. That also represents roughly a 10 times multiple to trailing EBITDA - a price that is pretty fair for Martek given the multiples on comparables like Givaudan, Symrise, or Croda.

A Good Deal For DSM
This looks like a completely rational and savvy deal for DSM. The company has been working hard to reduce its industrial/performance chemical exposure (over $1.6 billion in divestitures recently), while increasing its nutrition and pharmaceuticals/life sciences exposure. To that end, not only does Martek's polyunsaturated fatty acids business fit in well with DSM's infant nutrition business, but the two companies had already been working together for some time. 


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